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Pillar Two Implementation




The Pillar Two GloBE rules will have the status of a common approach. As such, members of the Inclusive Framework (IF) are not required to adopt them (ie they are not compulsory), but, if they do, they will implement and administer the rules in a way that is consistent with the outcomes provided for under Pillar Two.

Members of the IF are required to accept the application of the GloBE rules applied by other members, including agreement on the rule order and the application of any agreed safe harbors.

Both the IIR and UTPR will need to be implemented through domestic legislation. The OECD does, however, raise the possibility of the development of a multilateral instrument to facilitate the coordination of the GloBE rules that have been implemented by IF members.

The STTR, as a treaty-based rule, can only be implemented through bilateral negotiations and amendments to individual treaties or as part of a multilateral convention.

The OECD provides that members of the IF that apply nominal corporate income tax rates below the STTR minimum rate will implement the STTR into their bilateral treaties with developing country members of the IF when requested to do so.

A model treaty provision to give effect to the STTR is planned be released in 2022, along with a multilateral instrument for its implementation. 

The original timeframe was that Pillar Two should be brought into law in 2022, with the IIR coming into effect in 2023 and the UTPR in 2024.

International Implementation

The OECD published Model GloBE rules in December 2021 and Commentary in March 2022.  The OECD will also address the issue of how the GloBE Rules will co-exist with the US GILTI rules.

The OECD will also produce a detailed implementation framework, focusing on administrative, compliance and coordination issues. This is currently subject to a public consultation.

The European Commission released a Proposed Directive based on the model GloBE rules on December 22, 2021. Once approved, EU Member States will be required to transpose the final version of the directive into domestic law for implementation in 2024.

This was originally held up by Poland. They later relented but Hungary then raised objections in June 2022.

On June 30, 2022, the French Finance Minister announced that Pillar Two will be implemented with or without Hungary.

On September 9, 2022, Germany, France, Italy, Spain and the Netherlands issued a joint statement stating that if agreement is not reached on Pillar Two in ‘the next few weeks’ they will push forward domestic implementation of the Pillar Two GloBE rules ‘by any possible legal means’ in 2023. 

Draft Legislation

Country Implementation
United KingdomThe UK published draft legislation for the Pillar Two GloBE rules (which it calls the ‘Multinational Top-Up Tax‘) in July 2022.
South KoreaOn July 22, 2022, South Korea released a draft law to implement Pillar Two.
SwitzerlandOn August 17, 2022, the Swiss Federal Council issued a draft decree for the implementation of Pillar Two.
EUThe European Commission released a proposed directive based on the model GloBE rules on December 22, 2021.

Pillar Two Tracker

For more information on implementation in domestic jurisdictions and the EU, see:

OECD Pillar Two Developments Tracker

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